China is seeking to transform itself from a "made in China" to "designed in China" economic model. But Reuters reported on Tuesday that China’s ambitious state-mandated patent targets will curtail innovation standards, according to a European study.

The European Union Chamber of Commerce said in a report that China filed more than 1.6 million patent applications in 2011, but only 32 percent met the highest threshold for patent quality, Reuters said.

The study noted that while China's innovation potential is "impressive", its actual innovation is "overhyped".

"This explosion (of patent applications) has come with a price in terms of the quality and mix of patents. This is not in the right direction," European Chamber Secretary General Dirk Moens was quoted as saying.

Sometimes officials and academics drive the filing of low-quality patents because of financial incentives and performance evaluations for state-owned firms, Reuters said.

China not only gives patents for inventions, but also for designs and "utility models", incremental developments that can advance an existing product but rarely result in technological breakthroughs.

Reuters said the U.S. does not use utility model patents, though some developed countries, such as Germany, do.

Sixty-five percent of patent applications filed by medium and large-sized Chinese state-owned enterprises in recent years have been for the lower end design or utility model patents, making them among the country's least effective innovators, the study said.

It noted that at least 20 countries have greater innovation potential than the world's second largest economy.

But Elliot Papageorgiou, an intellectual property expert at Rouse Legal in Shanghai, said utility model patents are good for China.

"In developing economies, you're not going to get a new wheel, you're going to get an improved or cheaper wheel," Papageorgiou told Reuters.